New York, November 17, 2021 -- Moody's Investors Service ("Moody's") has assigned
definitive ratings to the notes issued by Avis Budget Rental Car Funding
(AESOP) LLC (the issuer). The Series 2021-2 Notes have an
expected final maturity of approximately 62 months. The issuer
is an indirect subsidiary of the sponsor, Avis Budget Car Rental,
LLC (ABCR, B1 stable). ABCR is a subsidiary of Avis Budget
Group, Inc. ABCR is the owner and operator of Avis Rent A
Car System, LLC (Avis), Budget Rent A Car System, Inc.
(Budget), Zipcar, Inc, Payless Car Rental, Inc.
(Payless) and Budget Truck.
Moody's also announced today that the issuance of the Series 2021-2
Notes, along with the implementation of a minimum depreciation schedule
that will be based on the market value of the vehicles, in and of
themselves and at this time, will not result in a reduction,
withdrawal, or placement under review for possible downgrade of
any of the ratings currently assigned to the outstanding series of notes
issued by the issuer.
The complete rating actions are as follows:
Issuer: Avis Budget Rental Car Funding (AESOP) LLC, Series
2021-2
Series 2021-2 Rental Car Asset Backed Notes, Class A,
Definitive Rating Assigned Aaa (sf)
Series 2021-2 Rental Car Asset Backed Notes, Class B,
Definitive Rating Assigned A2 (sf)
Series 2021-2 Rental Car Asset Backed Notes, Class C,
Definitive Rating Assigned Baa3 (sf)
Series 2021-2 Rental Car Asset Backed Notes, Class D,
Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The definitive ratings on the Series 2021-2 Notes are based on
(1) the credit quality of the collateral in the form of rental fleet vehicles,
which ABCR uses in its rental car business, (2) the credit quality
of ABCR as the primary lessee and as guarantor under the operating lease,
(3) the track-record and expertise of ABCR as sponsor and administrator,
(4) consideration of the vastly improved rental car market conditions,
(5) the available dynamic credit enhancement, which consists of
subordination and over-collateralization, (6) minimum liquidity
in the form of cash and/or a letter of credit, and (7) the transaction's
legal structure.
The total credit enhancement requirement for the Series 2021-2
Notes is dynamic, and determined as the sum of (1) 5.00%
for vehicles subject to a guaranteed depreciation or repurchase program
from eligible manufacturers (program vehicles) rated at least Baa3 by
Moody's, (2) 8.5% for all other program vehicles,
and (3) 12.60% minimum for non-program (risk) vehicles,
in each case, as a percentage of the outstanding note balance.
The actual required amount of credit enhancement will fluctuate based
on the mix of vehicles in the securitized fleet. As in prior issuances,
the transaction documents stipulate that the required total enhancement
shall include a minimum portion which is liquid (in cash and/or a letter
of credit), sized as a percentage of the outstanding note balance,
rather than fleet vehicles. The Class A, B, C Notes
will also benefit from subordination of 27.0%, 18.0%
and 12.0% of the outstanding balance of the Series 2021-2
Notes respectively.
Below are the assumptions Moody's applied in the analysis of this transaction:
Risk of sponsor default: Moody's assumed a 60% decrease in
the probability of default (from Moody's idealized default probability
tables) implied by the B1 rating of the sponsor. Moody's continues
to assume a 75% probability that ABCR would affirm its lease payment
obligations in the event of a Chapter 11 bankruptcy, informed by
pandemic-driven events that affected the rental car market (such
as the drastic and sudden decline in rental car demand and the resulting
high lease payments for a vastly underutilized fleet). The assumed
high likelihood of lease acceptance recognizes the strategic importance
of the ABS financing platform to ABCR's operation and the vastly improved
rental car market conditions. In the event of a bankruptcy,
ABCR would be more likely to reorganize under a Chapter 11 bankruptcy
filing, as it would likely realize more value as an ongoing business
concern than it would if it were to liquidate its assets under a Chapter
7 filing. Furthermore, given the sponsor's competitive position
within the industry and the size of its securitized fleet relative to
its overall fleet, the sponsor is likely to affirm its lease payment
obligations in order to retain the use of the fleet and stay in business.
Moody's arrives at the 60% decrease assuming an 80% probability
Avis would reorganize under a Chapter 11 bankruptcy and a 75% probability
(90% assumed previously) Avis would affirm its lease payment obligations
in the event of Chapter 11.
Disposal value of the fleet: Moody's assumed the following haircuts
to the net book value (NBV) of the vehicle fleet:
Non-Program Haircut upon Sponsor Default (Car): Mean:
19%
Non-Program Haircut upon Sponsor Default (Car): Standard
Deviation: 6%
Non-Program Haircut upon Sponsor Default (Truck): Mean:
35%
Non-Program Haircut upon Sponsor Default (Truck): Standard
Deviation: 8%
Fixed Program Haircut upon Sponsor Default: 10%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Car): 20%
Additional Fixed Non-Program Haircut upon Manufacturer Default
(Truck): 10%
Fleet composition -- Moody's assumed the following fleet
composition (based on NBV of vehicle fleet):
Non-program Vehicles: 90%
Program Vehicles: 10%
Non-program Manufacturer Concentration (percentage, number
of manufacturers, assumed rating):
Aa/A Profile: 25%, 2, A3
Baa Profile: 50%, 2, Baa3
Ba/B Profile: 25%, 1, Ba3
Program Manufacturer Concentration (percentage, number of manufacturers,
assumed rating):
Aa/A Profile: 0%, 0, A3
Baa Profile: 50%, 1, Baa3
Ba/B Profile: 50%, 1, Ba3
Manufacturer Receivables: 0%; receivables distributed
in the same proportion as the program fleet (Program Manufacturer Concentration
and Manufacturer Receivables together should add up to 100%)
Detailed application of the assumptions are provided in the methodology.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Rental Vehicle
Securitizations Methodology" published in October 2021 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1295602.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Moody's could upgrade the ratings of the Series 2021-2 Notes,
as applicable if, among other things, (1) the credit quality
of the lessee improves, (2) the likelihood of the transaction's
sponsor defaulting on its lease payments were to decrease, and (3)
assumptions of the credit quality of the pool of vehicles collateralizing
the transaction were to strengthen, as reflected by a stronger mix
of program and non-program vehicles and stronger credit quality
of vehicle manufacturers.
Down
Moody's could downgrade the ratings of the Series 2021-2 Notes
if, among other things, (1) the credit quality of the lessee
weakens, (2) the likelihood of the transaction's sponsor defaulting
on its lease payments were to increase, (3) the likelihood of the
sponsor accepting its lease payment obligation in its entirety in the
event of a Chapter 11 were to decrease and (4) assumptions of the credit
quality of the pool of vehicles collateralizing the transaction were to
weaken, as reflected by a weaker mix of program and non-program
vehicles and weaker credit quality of vehicle manufacturers.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
In rating this transaction, Moody's used a cash flow model
to model cash flow stress scenarios to determine the extent to which investors
would receive timely payments of interest and principal in the stress
scenarios, given the transaction structure and collateral composition.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Aron Bergman
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Karen Ramallo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
